Mainland Company Setting Up in Hong Kong: Three Decisions

At a glance

The regimes, eligibility and requirements described are as published by the Companies Registry, the IRD, the Immigration Department and the relevant mainland authorities.

Decision 1: branch or subsidiary

A subsidiary — a separate Hong Kong company held by the parent. Liability is generally separated, it is a separate taxable entity, and it can have its own tax residence.

A branch — a mainland company’s registered branch in Hong Kong. It is not a separate legal entity, and the parent carries the liability.

In practice most mainland companies going outbound choose a subsidiary, for three reasons:

• Liability separation — a problem in the Hong Kong business does not reach the parent directly
• Clean tax position — separate filing, and easier to rely on the arrangement
• External perception — customers, banks and partners are generally more comfortable with a separate company

The full comparison is in branch or subsidiary.

Decision 2: people

This decision reaches further than most people expect.

Registration only, nobody in Hong Kong — incorporating is no problem, but opening an account becomes difficult, and the substance position is weak.

Sending someone from the mainland — this involves a work visa. Mainland residents generally use the Admission Scheme for Mainland Talents and Professionals, sponsored by the employer; there are also schemes an individual applies for without sponsorship (the Top Talent Pass, for example). See what visa is needed to employ a non-resident.

Hiring locally — then you are an ordinary Hong Kong employer, subject to the Employment Ordinance, MPF contributions, employees’ compensation insurance and the employer’s return.

Practical advice: have at least one person or arrangement actually handling matters in Hong Kong. Receiving post, responding to queries, dealing with statutory filings — without that, a lot of things stall.

Decision 3: tax arrangements

This is the one most often taken in the wrong order — it belongs at the structuring stage, not at the point of paying a dividend.

The typical scenario: a Hong Kong company holds a mainland subsidiary and wants to pay a dividend up to Hong Kong at the year end. Under the Mainland–Hong Kong arrangement, a lower rate may be available where the conditions are met — and to rely on it you generally have to produce a Hong Kong certificate of resident status.

The good news: since 12 June 2023, for most of Hong Kong’s arrangements, an applicant incorporated in Hong Kong can be issued the certificate directly, without a Hong Kong economic substance assessment.

The caution: holding the certificate does not mean the mainland side will accept the claim. The mainland tax authorities assess conditions such as “beneficial owner” independently — where the Hong Kong company is a pure conduit, the claim can still be refused.

The full position is in the certificate of resident status.

Banking: the step that takes the time

Be prepared: this usually takes considerably longer than incorporating.

The bank wants to know: what real connection your business has to Hong Kong, how the money flows, and who is responsible here.

What good preparation looks like:

• A specific business description — not just “trading” or “investment”
• Actual contracts or purchase orders
• A complete structure chart — from the Hong Kong company up to the ultimate individual owners
• Local connections — premises, local customers or suppliers, arrangements for visits

And it is best to land the first piece of business before applying. Real dealings are more persuasive than any description.

See what documents to prepare and what to do after a rejection.

After landing: the annual fixtures

This is the part mainland companies most often underestimate:

• Annual return — within 42 days of the incorporation anniversary; the late fee escalates in bands
• Business registration certificate — renewed annually
• Audit — every Hong Kong limited company, with no “too small to need one”
• Profits tax return — on the deadline set by your year-end code
• Maintaining the statutory registers — directors, shareholders, significant controllers

The consequences of missing these are set out in a late annual return and a late tax return.

One misconception worth stating plainly: a Hong Kong company is not released from these obligations because it “does no business in Hong Kong”. They exist from registration until deregistration. What happens if it is left alone: leaving a company unattended.

The order we recommend

1. Settle the structure — branch or subsidiary, and where the shareholding sits.

2. Settle the people — who is in Hong Kong, and whether a visa is needed.

3. Incorporate and complete the basic compliance — registered address, registers.

4. Land the first piece of business.

5. Open the bank account.

6. If cross-border dividends or fees are involved, arrange the certificate of resident status.

The most common mistake is putting step 5 before step 4 — applying the week the company is registered with no business yet, then going back to fix it after being declined.

We support non-resident clients with incorporation, company secretary work, registered address, bookkeeping and tax filing, all handled online.

Talk to us, or get started.

This article is general information and does not constitute legal, tax or immigration advice. The regimes, eligibility, procedures and requirements are as published by the Companies Registry, the IRD, the Immigration Department and the relevant mainland authorities; cross-border structures warrant advice from a professional adviser.